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Autopay is making us worse at managing credit-card bills

wsj.com

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Re: Autopay is making us worse at managing credit-card bills

#81

Post by Sohcahtoa82 »

andrelaszlo wrote: post #62

I set up my (Swedish) CC bill to autopay the full amount each month. I only use it for emergencies though. It seems like it's really common elsewhere (the US) to use it for larger purchases. Isn't it very uneconomical? I recognize that I might be speaking from a position of relative financial privilege, but it doesn't seem limited to people in acute financial distress? Maybe it works differently too. I've read stuff…

In the USA, it's very common for credit card companies to provide rewards or rebates based on your spending. Meanwhile, interest on purchases doesn't begin accruing until 30 days after the purchase.

This means using a credit card is free money. I spend $100 on my credit card, I get $1-3 back depending on what I'm buying, and if I pay in full on my next statement, I pay $0 in interest.

Re: Autopay is making us worse at managing credit-card bills

#82

Post by neogodless »

WendyTheWillow wrote: post #35
sxg wrote: post #13

"Most people who enroll in autopay choose either the minimum payment or full balance, said Wang." This is the problem. You should always be able to comfortably make the full payment if you manage your budget proactively—I highly recommend YNAB for this. If you can't proactively manage your budget, you should be using a debit card.

It’s also arguably innumerate, or at least financially unaware. The middle option is the optimal choice, as it gives you a free one-month loan from the bank. Interest doesn’t accrue until you’ve carried a balance over month to month.

What is the "middle option" between paying the minimum and paying the full balance that is more optimal?

If you pay the full balance on the due date, you get the interest-free loan. It's not exactly one month, but it's from purchase date until due date, which is something like 25-55 days.

Re: Autopay is making us worse at managing credit-card bills

#83

Post by paxys »

So a chunk of consumers use autopay to pay their bills in full every month, and another chunk use it to pay the minimum amount and let the rest accrue interest. I'm not sure how one can draw the conclusion that autopay is at fault here? If anything the lack of autopay would make things a lot worse, because plenty of people in the first set would neglect to pay their bills as well.

Re: Autopay is making us worse at managing credit-card bills

#84

Post by oh_sigh »

michaelmior wrote: post #43
CydeWeys wrote: post #38

Earlier quoted context omitted.

Why though? Are you actually paying the full statement balance in time each month this way and this avoiding interest charges? If so, then by paying before the due date you're giving away money unnecessarily, especially with interest rates at 5% now.

Not the OP, but the most likely reason I can think of is manual payments give an opportunity to review all charges. But still having the minimum set to autopay ensures that if you forget or unable to, the consequences are less severe.

I used to review charges, and it was always a pain. I know where I shop and don't shop, so if I see a charge for a place I don't shop, it is clearly fraud. But, a lot of fraud happens where you shop(because that is where people may have access to your card). That is, I gas up at Shell, but did I really gas up 23 days ago?

Now, I have a text message/app notification come through immediately whenever there is a charge > $0.00 (chase at least supports this). Reviewing immediately, and then knowing that all charges are real at the end of the month, has been a real pleasant change in that workflow.

Re: Autopay is making us worse at managing credit-card bills

#85

Post by jtokoph »

andrelaszlo wrote: post #62

I set up my (Swedish) CC bill to autopay the full amount each month. I only use it for emergencies though. It seems like it's really common elsewhere (the US) to use it for larger purchases. Isn't it very uneconomical? I recognize that I might be speaking from a position of relative financial privilege, but it doesn't seem limited to people in acute financial distress? Maybe it works differently too. I've read stuff…

In the US, if you pay your credit card bill in full each month you don’t pay any interest or fees. Most if not all cards give cash back or rewards points in the range of 1-5% depending on the merchant category. So you effectively get a 1-5% discount on all spending compared to paying with cash or debit.

Re: Autopay is making us worse at managing credit-card bills

#87

Post by [deleted] »

icedchai wrote: post #16
ricardou wrote: post #6

I don't know what it is, but autopay causes me so much mental load. Instead I go over my bills every two weeks, following the tune of my paycheck. Every two weeks I check all credit cards, pay my mortgage, utilities, etc.

I haven't paid bills "manually" in almost 15+ years. You waste so much time opening mail, writing checks, buying stamps, etc. I put everything on auto-pay, with the exception of property taxes (only because the city won't allow it.)

[deleted]

Re: Autopay is making us worse at managing credit-card bills

#88

Post by 13of40 »

ricardou wrote: post #6

I don't know what it is, but autopay causes me so much mental load. Instead I go over my bills every two weeks, following the tune of my paycheck. Every two weeks I check all credit cards, pay my mortgage, utilities, etc.

I'm the opposite. I know it's wrong, because I'm giving companies free loans or whatever, but when I pay recurring bills (that aren't on autopay) I just multiply by 10 so I only have to pay once a year or so.

Re: Autopay is making us worse at managing credit-card bills

#89

Post by clockwork-dev »

Rapzid wrote: post #19
crazygringo wrote: post #11

The headline is not supported by the article. The actual truth of the article comes in the middle: > Borrowers who use autopay pay off between 8% and 17% less of their monthly credit-card balances compared with customers who make manual payments, according to the study... When credit-card customers sign up for autopay, they typically have three options for monthly payments: the required minimum, the statement balance…

I auto-pay with minimal and log in at the beginning of every month and pay the full balances.

With higher interest rates, I stopped paying the full balance and instead try squeezing a little extra interest out of the money (I buy USFR, which is giving around 5.3% right now). I still pay the statement balance of course.

Re: Autopay is making us worse at managing credit-card bills

#90

Post by neogodless »

icedchai wrote: post #16
ricardou wrote: post #6

I don't know what it is, but autopay causes me so much mental load. Instead I go over my bills every two weeks, following the tune of my paycheck. Every two weeks I check all credit cards, pay my mortgage, utilities, etc.

I haven't paid bills "manually" in almost 15+ years. You waste so much time opening mail, writing checks, buying stamps, etc. I put everything on auto-pay, with the exception of property taxes (only because the city won't allow it.)

Do you not have the option to receive emails and pay online?

All of my "manual" bills work that way. It takes a few seconds of clicking to schedule the payment on the due date for the full amount, and even log it to my software, which doubles as a chance to check that there wasn't something unexpected going on.

I think being fully aware of every bill or credit card you pay is helpful in being full control of your finances. I get that impression that some people using automatic payments don't slow down to review things carefully. That may not be the case for you, but that doesn't mean others don't make that mistake.

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